This paper examines BASF's corporate growth strategy, arguing that the company's sustained expansion is rooted in its deliberate focus on non-cyclical product markets. Drawing on BASF's 2002 Annual Report and industry analyses, the paper surveys five major divisions—industrial chemicals, plastics and fibers, performance products, agricultural products, and oil and gas—demonstrating how each contributes to stable revenue regardless of broader economic conditions. The analysis also highlights BASF's use of strategic plant openings and closures, international partnerships, cross-divisional synergies, and acquisitions to reduce costs and capture growth in emerging markets, particularly in Southeast Asia and Europe.
BASF, one of the world's largest chemical companies, has a company slogan which states, "We don't make a lot of the products you buy. We make a lot of the products you buy better" (BASF, "About Us"). While this is true, BASF's growth strategy is still one of expansion, competition, and aggressive growth (BASF, 18–19). By focusing on non-cyclical portions of the company's markets, BASF is able to sustain consistent growth even in periods of economic fluctuation.
It is important to first understand the concept behind non-cyclical product development. Generally, non-cyclical products are not correlated to the broader economy, while cyclical products are highly correlated. Non-cyclical products include anything that assists in the production or distribution of goods and services that consumers require regardless of income, such as food, power, water, and gas (Investopedia). These products, along with thousands of others, represent the fundamental needs of consumers and will therefore continue to experience growth even during economic downturns.
BASF has five basic product categories. The first is the production of organic and inorganic chemicals (BASF, 3). Nearly 8,000 of BASF's products are basic chemicals and intermediates produced from crude oil, natural gas, rock salt, water, sulfur, and other base chemical compounds. These raw materials are then turned into higher-value products through BASF's vast production chain (BASF, 22). BASF also produces catalysts — products used to reduce the activation energy of chemical reactions — as well as glues and resins for wood applications (BASF, 23). These products are sold to companies that require such components for the manufacturing of other, high-value goods. BASF's chemical division is also a leader in plasticizers, used to shape plastics into commonly used products, and in pharmaceutical intermediates, which enable the creation of active ingredients and dyes in pharmaceuticals (BASF, 25).
By default, these chemicals are sold to a broad customer base that incorporates them into a wide variety of products, including medicines, plastics, fuel cells, plastic wrap, medical devices, and textiles. While raw material prices fluctuate — and thus affect cost predictions for BASF — the proprietary nature of their chemical production output allows the company to consistently produce strong earnings ("Valuation of the Specialty Chemistry Industry," 16). Additionally, BASF's growth strategy includes closing unprofitable production plants, such as the facility in Geismar, Louisiana, in 2002 (BASF, 22). The creation of new plants in expanding markets such as Malaysia and China (BASF, 24) further allows the company to increase production at lower cost, supporting growth even during periods of economic hardship.
A second area of growth at BASF is their plastics and fibers division. BASF produces not only styrenics and polymers, but also polyurethanes. Styrenics such as Luran S, Ecoflex, and Basotect are found in products including CD cases, packaging, monitors, thermal insulation, and paper food packaging (BASF, 30). Polymers are often used in engine and gear components, and polyurethane is a compound found in shoes and approximately 8,000 other products (BASF, 31).
BASF's production of components used in other manufacturers' products is central to this division's growth strategy. By developing new uses for these components, collaborating with existing customers on expanding their applications, and broadening the customer base, BASF is well positioned for substantial growth. BASF assists customers such as Hewlett-Packard in the development of new printers and other products, thereby increasing HP's dependence on BASF-supplied materials (BASF, 28). In Asia, the company has partnered with large firms in Singapore to increase the marketing of established products such as styrene, which is widely used in the region (BASF, 29). Given that per capita consumption of polymers is expected to rise by over 85 percent in Southeast Asia by 2010, such moves are vital to BASF's growth (IAL Consultants, 16).
This division also incorporates non-cyclical principles into its strategy through deliberate portfolio management. In 2003, BASF sold the fiber portion of the division and acquired Honeywell International's engineering plastics business (BASF, 28). By exchanging one product line for a more strategically aligned non-cyclical line, BASF strengthened its core product base. With growth expectations of five percent per year in the engineering plastics segment (IAL Consultants, 5), BASF has positioned itself well for future expansion.
"Coatings, superabsorbents, synergies, and market expansion"
"Drilling focus, WINGAS partnership, and pipeline expansion"
"2002 revenue data confirms non-cyclical strategy's success"
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